Dividend Harvesting Portfolio Week 97 Update: $9,700 Allocated, $745.52 Projected Annual Dividends

The Dividend Harvesting Portfolio closed out 2022 down -3.97% (-$381.38) after allocating $9,600 toward income investments. The S&P 500 started 2023 out on a positive note, finishing the 1st week of 2023 up 0.71%, while the Nasdaq closed in the red by -0.15%. 2023 will be a continuation of the Dividend Harvesting Portfolio series, and I have made some minor updates to the tables. On the first graphic below for the main portfolio snapshot, I have reset the weekly dividends to represent 2023, and added a line item to display 2022’s dividends generated. Once January is over, I will start willing in the 2023 MoM dividend data to look at the YoY growth. I am excited for the year to progress, and hopefully, I can accomplish the goals I put in place last week.

At the end of week 97, which is the first week of 2023, the Dividend Harvesting Portfolio finished with a portfolio value of $9,630.46. This is a decline of -0.72% (-$69.54) from my invested capital. In the first week of 2023, 9 positions generated $7.69 in dividend income, which was reinvested. In week 97, I increased my position in Omega Healthcare Investors (OHI), Intel Corporation (INTC), Starwood Property Trust (STWD), Virtus InfraCap U.S Preferred Stock ETF (PFFA), and the PIMCO Dynamic Income Opportunities Fund (PDO). This increased my projected annual dividend income by 1.4% ($10.27) to $745.52.

I allocate capital toward big tech, funds, dividends, and growth outside of my retirement accounts. These are not my only investments, but I did open a separate account, so I could easily track and document this series. I intentionally created broad diversification throughout the Dividend Harvesting portfolio so I could benefit from sector rotations and mitigate my downside risk. Investors who are too exposed to growth companies or large-cap tech have gotten crushed as the investment landscape changes. On the growth and tech side of my investments, I am feeling the pain as some of my favorite companies, including Alphabet (GOOGL, GOOG), Amazon (AMZN), and Meta Platforms (META), have been taken to the woodshed.

I am going to address a question that continues to surface. I am not trying to beat the market with this portfolio. I love index funds and am invested in several index funds. I love dividend investing due to the stream of cash flow it generates. I don’t want 100% of my assets outside of real estate tied to an S&P index fund. I have created a personal investment strategy that works to achieve my investment goals, and having a stream of income generated from dividends is part of my investment strategy. Low-cost index funds are one of the best investments anyone can make in my opinion, and the Dividend Harvesting portfolio is not meant to be a substitute for an index fund. I have read many questions about dividend investing and wanted to start a portfolio from the ground up and document its progress to disprove many misconceptions, including that you need a large amount of seed capital to make dividend investing work for you.

This series has never been about hitting a target yield, generating a certain amount of profit, or beating the market. I had two specific goals with this series. The first was to create a blueprint for constructing a dividend portfolio by documenting the journey starting from the beginning. The second goal was to illustrate how allocating capital each week toward investing, regardless of the amount, would be beneficial in the long run.

Too many people are under the illusion that you need tens of thousands or even hundreds of thousands to benefit from investing. Instead of using my real dividend portfolio as an example, I decided to start a new account, fund it with $100, and add $100 weekly, providing a step-by-step guide to dividend investing. This methodology doesn’t have to be used for dividend investing, and it could be as simple as an S&P index fund or a Total Market fund. Hopefully, this series is inspiring people to invest in their future to attain financial freedom.

A Historical Recap of the Dividend Harvesting Portfolio’s Investment Principles and Historical Performance

Investment Objectives

• Income generation
• Downside mitigation through diversification
• Capital appreciation

Below are the fundamental rules I have put in place for this Portfolio:

• Allocate $100 weekly to this Portfolio
• Only invest in dividend-producing investments
• No position can exceed 5% of the Portfolio
• No sector can exceed 20% of the Portfolio
• All dividends & distributions are to be reinvested

Below is a chart that extends from week 1 through the current week to illustrate the Dividend Harvesting Portfolio’s Progression

• Blue line is my initial investment $100 in week 1, $1,000 in week 10, etc.
• Red line is the account value at the end of each week
• Yellow line is the annual dividend income the Dividend Harvesting Portfolio was projected to generate after that week’s investments and dividends reinvested

The Dividend Harvesting Portfolio Dividend Section

Here is how much dividend income is generated per investment basket:

• Equities $224.61 (30.13%)
• ETFs $188.03 (25.22%)
• REITs $143.18 (19.21%)
• CEFs $141.56 (18.99%)
• BDCs $48.14 (6.46%)

Collecting dividends can serve many functions in a portfolio. Some investors utilize dividends to supplement their income and live off. I am building a dividend portfolio for myself 30 years into the future. In 2022, I have collected $490.76 in dividend income from 533 dividends. This has allowed the Dividend Harvesting portfolio to stay in the black while growing the snowball effect. In week 1 of 2023, I collected $7.69 in dividends, which is 1.57% of my 2022 dividend income from 9 dividends which is 1.69% of the dividends generated throughout 2022.

These dividends allow me to gain additional equity in my investments while increasing my future cash flow in down markets. This style of investing isn’t for everyone, but if you’re looking to generate consistent cash flow while mitigating downside risk, this method has worked for me. I am hoping to collect around $850 in dividends in 2023, which will be reinvested.

In December, I generated $63.44 in dividend income, a YoY increase of 124.49% or $35.18. It’s going to be interesting to see how this chart progresses throughout 2023 and what the YoY growth rates will be.

I haven’t added new positions since week 90, and the Dividend Harvesting Portfolio has 604 individual dividends flowing through its portfolio on a weekly basis.

The goal of generating enough income from the dividends to purchase an additional share per year has been the never-ending project of this portfolio. There are now 17 total positions generating at least 100% of their share value in dividends within the Dividend Harvesting portfolio.

The Dividend Harvesting Portfolio Composition

Many of the readers have asked if I could break down the individual positions within these sectors. I created pie charts for each individual sector and have illustrated how much each position represents of that sector of the Dividend Harvesting portfolio. Since I only have 1 position in Food & Staple Retailing and Industrials, I did not make a chart for those. 3M (MMM) and Walgreens Boots Alliance (WBA) represent 100% of those sectors. The charts will follow the normal portfolio total I have constructed. Please keep the ideas coming, as I am happy to add as much detail to this series as I can.

In week 97, ETFs became the largest section of the Dividend Harvesting Portfolio’s composition. Individual equities make up 44.66% of the portfolio and generate 30.13% of the dividend income, while exchange-traded funds (“ETFs”), closed-end funds (“CEFs”), real estate investment trusts (“REITs”), business development companies (“BDCs”), and exchange-traded notes (“ETNs”) represent 55.41% of the portfolio and generate 69.87% of the dividend income.

I have a 20% maximum sector weight, so when a singular sector gets close to that level, I make sure capital is allocated away from that area to balance things out. In 2022, I will make an effort to even out these portfolio percentages. As more capital is deployed, the bottom half of the portfolio weighting will increase.

Industry	Investment	Portfolio Total	% of Portfolio
ETFs	$1,739.55	$9,630.46	18.06%
REIT	$1,727.91	$9,630.46	17.94%
Closed End Funds	$1,348.77	$9,630.46	14.01%
Oil, Gas & Consumable Fuels	$931.06	$9,630.46	9.67%
Communication Services	$671.35	$9,630.46	6.97%
Consumer Staples	$594.29	$9,630.46	6.17%
Technology	$649.04	$9,630.46	6.74%
Financials	$586.96	$9,630.46	6.09%
BDC	$509.00	$9,630.46	5.29%
Utility	$278.52	$9,630.46	2.89%
Pharmaceuticals	$248.16	$9,630.46	2.58%
Industrials	$132.42	$9,630.46	1.38%
Food & Staple Retailing	$111.62	$9,630.46	1.16%
Independent Power & Renewable Electricity Producers	$97.21	$9,630.46	1.01%
Cash	$4.52	$9,630.46	0.05%

Click to enlarge

In week 97, Verizon (VZ) remained my largest holding and crept past 4.5% of the portfolio. I am keeping a close eye on VZ as I want to add an additional share, but it’s too close to the 5% level.

Week 97 Additions

In week 97, I added 1 share to each of the following positions:

• Omega Healthcare Investors (OHI)
• Intel Corporation (INTC)
• Starwood Property Trust (STWD)
• Virtus InfraCap U.S Preferred Stock ETF (PFFA)
• PIMCO Dynamic Income Opportunities Fund (PDO).

Omega Healthcare Investors

• I recently wrote an article (can be read here) outlining my investment thesis on OHI. When I had purchased OHI in week 97, it traded around $28, and I feel OHI is a strong buy under $30. With a yield that exceeds 9% and a dividend that hasn’t been reduced throughout the pandemic, I couldn’t resist adding another share.

Starwood Property Trust

• STWD had declined under the $19 level, and its dividend exceeded 10% when I added another share. STWD is the first REIT I have ever invested in, and I feel their CEO Barry Sternlicht is the best in breed. I feel STWD is a strong buy under $20, and I will be adding more shares in the coming weeks if its share price doesn’t improve.

Intel Corporation

• I think INTC’s troubles are overblown, and the market overreacted to its financials. INTC is now yielding over 5%, and I am building a position for the long-term as its future looks bright as chip manufacturing will add another dynamic to its revenue.

Virtus InfraCap U.S Preferred Stock ETF

• I have limited exposure to preferred shares, and I happen to think Jay Hatfield is an excellent portfolio manager. With the yield exceeding 10%, I picked up another share.

PIMCO Dynamic Income Opportunities Fund

• Adding another share of PDO came about because I was researching PIMCO’s closed-end funds the other day, and I believe 2023 could be a good year for fixed-income investments. I want to get PDO to the point where it’s generating at least 1 share per year through its dividends.

Week 98 Gameplan

In week 98, I am thinking about adding an additional share to the following positions:

• Walgreens Boots Alliance (WBA)
• Kinder Morgan (KMI)
• JPMorgan Equity Premium Income ETF (JEPI)

Conclusion

The first week in 2023 started out well as the Dividend Harvesting Portfolio regained a lot of ground and has come within 1% of becoming profitable again. I believe my projected annual income from dividends will exceed $1,000 sometime this summer, and I am looking forward to how 2023 progresses. Please leave all of your suggestions and comments below, as I will be adding positions based on reader comments in week 100.